What Happened?
Shares of workforce housing company Target Hospitality (NASDAQ: TH) jumped 7.5% in the morning session after Stifel upgraded the stock to Buy from Hold and raised its price target, citing the company's new multi-year contract in the data center market.
The investment firm Stifel boosted its rating on the stock to Buy from Hold and raised its price target to $11.00 from $7.50. The upgrade was driven by Target Hospitality's recent announcement of its first data center contract, a strategic move into a new business segment. The multi-year agreement is to build and provide services for a data center campus in the Southwestern United States. This contract is expected to generate a minimum of $43 million in revenue through September 2027. Stifel's analysts noted that they believe several similar deals are in the company's pipeline, suggesting potential for further growth.
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What Is The Market Telling Us
Target Hospitality’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 3.8% on the news that the company announced a multi-year, $43 million contract to construct and provide hospitality services for a regional data center campus. The agreement, which runs through September 2027, is expected to generate approximately $43 million in minimum committed revenue. Target Hospitality will construct and provide comprehensive services for a new "Data Center Community" in the Southwestern U.S., initially for 250 individuals with potential to expand to 1,500. This strategic move into the data center market is being done with high capital efficiency, as the company plans to use a portion of its existing assets. This will result in a minimal net capital investment of only $6 to $9 million in 2025, a year in which it expects to realize about $5 million in revenue from the contract.
Target Hospitality is down 11.5% since the beginning of the year, and at $8.58 per share, it is trading 21% below its 52-week high of $10.86 from January 2025. Investors who bought $1,000 worth of Target Hospitality’s shares 5 years ago would now be looking at an investment worth $5,875.
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